The Importance Of Operations Management In Firms

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Operation Management is responsible for all the activities that are directly concerned with making an organization's product. It organizes the process of taking raw materials and turning them into products that satisfy customer demand .

Organisation Background

Tesco was founded in 1924 by John Edward Cohen. Jack 'the Slasher' Cohen, as he was better known, started out as a market stall trader in the East End of London. The name Tesco, was first used on tea, and was derived from the initials of Cohen's tea supplier, T.E.Stockwell, combined with the first two letters of Cohen. Tesco Stores Limited was incorporated in 1932.

Tesco, Britain's biggest and most profitable supermarket chain, is the darling of the City. But behind the fascia of the 'under one roof' out-of-town Tesco Extra, or the friendly high street Tesco Metro, lies a ruthless billion pound operation. In recent years.

Marketing Mix & Starbucks


Marketing mix can be defined as combination of marketing elements used in the sale of a particular product.(Marketing, 2007). The elements, also known as the four Ps, are product, price, place (of distribution), and promotion. All are important in defining and fulfilling a target market. Companies use different aspects of marketing mix to help them better serve their target market. Tesco primarily focus is to provide outstanding service and products to their customer, while earning their loyalty. In addition to the price, the convenience, and other benefits, consumers are demanding more. (News & Release, 2006) We at Tesco have seen significant loyalty and value around the trust we have built with our customer. (News & Release, 2008)

Marketing mix is a combination of marketing elements used to sale a product or service to consumers. The elements of marketing mix, also known as the four Ps are (1) product - good or service (2) price - cost of product or service, (3) place - where product or service is located, and (4) promotion - advertisement of product or service. Each element is used by companies to help meet the needs of a target market. A target market is an identifiable group of people that could benefit from purchasing your product, visiting your site, and/or responding to some other call to action. (Marketing & Management, 2007)

Product is the first element of marketing mix. A product is any combination of goods and services offered to satisfy the needs and wants of consumers. (Marketing, 2007) A product can either be tangible or intangible. A tangible product is a product that can be touched by a consumer, such as a car or computer. An intangible product is a service that cannot be touched, such as computer repair, income tax preparation, or an office call. (Marketing, 2007) A product can also be divided into three levels...

Tesco Product Mix

A product is anything that can be offered to a market to satisfy a want or need. Products include physical goods, services, experiences, events, persons, places, properties, organizations, Another vital part of building a business plan is to determine the marketing mix that you are planning to use. The marketing mix is the balance of marketing techniques required for selling the product. Its components are often known as the four Ps:

Price - the price of the product - particularly the price compared to your competitors - is a vital part of marketing. There are two possible pricing techniques:

Market skimming - pricing high but selling fewer

Market penetration - pricing lower to secure a higher volume of sales

Product - targeting the market and making the product appropriate to the market segment you are trying to sell into

Promotion - this may take the form of point of sale promotion, advertising, sponsorship or other promotions.

Place - this part of the marketing mix is all about how the product is distributed. Current trends are towards shortening the chain of distribution.

There are those that now refer to another 3Ps bringing the total to 7! The other three are people, physical environment and process.

People - this stresses the importance of people in the marketing process; often the first point of contact with any business is a human being - the impressions given by this initial contact may be very important. In addition, the role of human beings in developing customer relations is seen as increasingly important especially in a knowledge driven economy.

Physical Environment - this refers to the importance in making the physical environment related to the product or service as welcoming and as reflective of the business as possible - for example, look at the showrooms of car dealers - many are very well lit, stylish in terms of furniture and decoration and include seating areas, coffee making facilities, newspapers and children's play areas.

Process - the process by which the product is either manufactured or passed on to the final user. This might include the extended use of ICT facilities to speed up ordering, delivery, etc.

Product Mix

A product mix (also called product assortment) is the set of all products and items that a particular marketer offers for sale. At Kodak, the product mix consists of two strong

product lines: information products and image products. At NEC (Japan), the product mix consists of communication products and computer products.The product mix of an individual company can be described in terms of width, length, depth, and consistency. The width refers to how many different product lines the company carries. The length refers to the total number of items in the mix. The depth of a product mix refers to how many variants of each product are offered. The consistency of the product mix refers to how closely related the various product lines are in end use, production requirements, distribution channels, or some other way.

These four product-mix dimensions permit the company to expand its business by (1) adding new product lines, thus widening its product mix; (2) lengthening each product line; (3) deepening the product mix by adding more variants; and (4) pursuing more product-line consistency.

Categories of Service Mix

As the previous examples show, services are often part of a company's total offering in the marketplace. Five categories of an offering's service mix can be distinguished:

1. Pure tangible good: The offering is a tangible good such as soap; no services accompany the product.

2. Tangible good with accompanying services: The offering consists of a tangible good accompanied by one or more services. Tesco, for example, offers repairs, maintenance, warranty fulfillment, and other services along with its product

3. Hybrid: The offering consists of equal parts of goods and services. For example, people patronize restaurants for both food and service.

4. Major service with accompanying minor goods and services: The offering consists of a major service along with additional services or supporting goods. For example, airline passengers are buying transportation service, but they get food and drinks, as well.

5. Pure service: The offering consists primarily of a service; examples include baby-sitting

Tesco objective inter-link with and support Strategic objective

On the strategic level long term decisions are made, these are related to location, production, inventory, and transportation. Location decisions are concerned with the size, number, and geographic location of the supply chain entities, such as plants, inventories, or distribution centers. The production decisions are meant to determine which products to produce, where to produce them, which suppliers to use, from which plants to supply distribution centers, and so on. Inventory decisions are concerned with the way of managing inventories throughout the supply chain. Transport decisions are made on the modes of transport to use.

Decisions made on the strategic level are of course interrelated. For example decisions on mode of transport are influenced by decisions on geographical placement of plants and warehouses, and inventory policies are influenced by choice of suppliers and production locations. Modeling and simulation is frequently used for analyzing these interrelations, and the impact of making strategic level changes in the supply chain.

Planning: The requirement triggered by the customer's sales order will be combined with other orders. The planning department will create a production plan to produce the products to fulfill the customer's orders. To manufacture the products the company will then have to purchase the raw materials needed.

Purchasing: The purchasing department receives a list of raw materials and services required by the production department to complete the customer's orders. The purchasing department sends purchase orders to selected suppliers to deliver the necessary raw materials to the manufacturing site on the required date.

Inventory: The raw materials are received from the suppliers, checked for quality and accuracy and moved into the warehouse. The supplier will then send an invoice to the company for the items they delivered. The raw materials are stored until they are required by the production department.

Production: Based on a production plan, the raw materials are moved inventory to the production area. The finished products ordered by the customer are manufactured using the raw materials purchased from suppliers. After the items have been completed and tested, they are stored back in the warehouse prior to delivery to the customer.

Transportation: When the finished product arrives in the warehouse, the shipping department determines the most efficient method to ship the products so that they are delivered on or before the date specified by the customer. When the goods are received by the customer, the company will send an invoice for the delivered products.

Supply Chain Management:

Tesco have thousands of suppliers from around the world, ranging from farmers and small companies delivering a single product directly to a few local stores, to large multinational companies whose products we stock in all our markets.

Our customers want the best quality, choice and value for money. To provide this we need strong and constructive relationships with reliable suppliers.

We build long-term relationships with our suppliers, as we recognise that our success is linked to theirs. We therefore expect to offer fair terms and conditions while getting the best value for our customers.

Suppliers are required to meet our expectations on quality and value - as well as on hygiene, environmental, animal welfare and labour standards.

Let us look at three key terms within supply chain management:

Customer satisfaction says something about the level of satisfaction among a company's customers. It is in this sense a very vague term. Therefore customer service is often discussed in terms of the metrics which are used to measure it.

Typical measures of customer service are a company's ability to fill orders within due date (fill rate), or its ability to deliver products to customers within the time

quoted (on-time deliveries). Other metrics should be used to for example evaluate the delivery performance of orders that are not delivered on-time. A way to indicate this is to measure the average time from order to delivery.


Manufacturing entities have inventories for raw products (RPI), products in the production process (WIP), and finished products (FGI). In addition there are often warehouses or distribution centers between the different levels of the supply chain. Inventories are costly. Binding capital in inventories prevents the company from investing this capital in projects of higher return. The holing cost inventories are therefore often set as high as 30 - 40% of the inventory value! In addition it is desirable to avoid so-called dead inventory, i.e. inventory that is

left when a product is no longer on the market (often referred to as end of life (EOL) write-off). As we see it is in every company's interest to keep inventory levels at a minimum. Much effort has been put into this, for example an entire manufacturing paradigm has come out of it. A main objective of the Just in Time (JIT) paradigm is to virtually abolish inventories. The efforts made have been more or less successful.


can be defined as the ability to respond to changes in the environment. In the case of a manufacturer, flexibility is the ability to change the output in response to changes in the demand. In a supply chain the flexibility of one entity is highly dependent on the flexibility of upstream entities. The overall flexibility of a supply chain will therefore depend on the flexibility of all the entities in a supply chain, and their interrelations.

Managing operation flow chart (in store)

Store operation flow chart

Regional Manager

Store Manager

Deputy Manager


Customer service

Team leader

Sales people

Regional manager

He or she plays a crucial role in leading by example, inspiring and developing branch manager to deliver profit growth. The regional manager have been mandated to deliver a organisation standard by analysis, interpret and act on complex data and they are passionate about customer service and the regional manager in Tesco are team player who are commercially perspective as well managing performance.

Store manager

The branch manager in TESCO are responsible for profit generation, good customer service teaching or coaching, developing and leading their team, stock management which has made the TESCO to have high relative share index and high growth rate index among the competitor in UK and international because all store manager are giving sensing of belonging in management decision when it come to decision making that can drive the organisation forward among the competitor.

Deputy Manager

The deputy manager role is close to branch store manager, which inspire the staff and aim to coach the sales people and also to increase store profitability. They also aim to give their customer best product and service in order to enhance the customer satisfaction. Through their reliance and strive they are able to manage their staff perfectly base on their skill and experience they have which has make them to delivered good product and service to their customer.


The role of supervisor is to monitored the sales team in the store and make sure that all goods are intact and any product the got faulty can be replace with good one. He or She will also ensure that customer are received best service from their staff which give feed back to manager on customer behaviors and staff performances.

Team leader

The role of team leader is to enhance and make sure they are supersede the store profitability by delivered good result as well supervising and teaching a sales team base on their experience

In order to lead the store to maximise profitability they focused on delivery result through effective leadership, providing an outstanding customer experience and ensuring perfect and easy store operation e.g., Excellent administration, good customer service, warehouse and replenishment.

Customer service

The role of customer service is to ensure that customers are received best service and to attend to customer enquiry and solve their problem. It is a front desk of the organisation which deal with customer face to face contact, and they also ensure product that got fault are returned via customer service desk and they give best customer satisfaction to their customers so that they can have value for their money.

Sales Team

They help the customer to find right product for them by asking them right question, they provide product demonstration. Sales team should work with other staff in all area of the store in order to meet store profit target. They also deal with store stock check and merchandising product.

Recommendations That Could Improve Tesco Supply Chain:

Analyse the types of international strategy, appreciate the importance of sourcing and procurement as an operations strategy.

Cross-organizational teams across the supply chain can bring great perspective to the overall team process. Tesco should have representatives from design, business units, purchasing, manufacturing, equipment purchasing, planning, customer, logistics, IT, and finance, which was to take a fully integrated view from customer to supplier.

Integration and Coordination

Build an implementation plan that doesn't negatively impact key metrics: cost, quality, customer and service levels, and margin.

Engage employees early on in the process, especially those with influence and knowledge of the company's supply chain.

Listen to market signals and align demand planning accordingly across the supply chain, ensuring consistent forecasts and optimal resource allocation.

Communicate the need for transformation in a positive way, building on successes and looking to the future as opposed to a focus on fixing problems.

Technologies to enable the more effective and intelligent use of physical, logistics, infrastructure of road and rail, to enhance customer service, reduce distribution costs and reduce the impact on the environment.

To improve sustainability in the face of increasing speed of technological developments -Tesco should develop more effective ways of defining its long-term research agenda and raise R&D spend to the average level of their competitors.

II) Identify , analyse and evaluate the range of tools and techniques you use

for managing operations.

The following range of tools and techniques used by tesco for managing operations. Outlined figure below is a Balance Scorecard used to demonstrate how tesco motivates its employees to delivery its strategy on a day-to-day basis.

The difference between this and other approaches is that it is not only about measurement, but also about the ability to translate vision and strategy into action. This method works well for tesco, the approach has the ability to transform strategic planning from an academic exercise into a core part of the business.

Tesco Corporate Steering wheel

Source: Tesco Plc 2008

According to Tesco's CEO, Sir Terry Leahy, the adaptation of the Balance Scorecard research by Robert S. Kaplan into the Tesco`s "Steering Wheel" helped the company stay focused on its strategy in the last 20 years. The wheel has five 90 degree arcs which represent the four Balance Scorecard performance areas of Finance, People, Operations, Customers and Community, a field recently added by tesco.

Finance: When Tesco measure financial performance they tend to focus on the past. However, this does not provide all the information needed to help guide long-term investment decisions and demonstrate how Tesco can create future value. The balanced scorecard requires a more holistic approach to thinking through issues and to the way information is gathered. It recognizes the importance of customers, suppliers, employees, processes, technology, and innovation in helping organisations to deliver the future, and builds on other management ideas such as total quality management (TQM). Most importantly, the approach incorporates a system of feedback loops- centered on both internal business process outputs and the outcomes of business. Strategies-that act as a means of identifying and understanding any problems.

However, the behaviors needed to support the steering wheel may require a mindset change from participants. Opening up ownership and sharing information, but being responsible for the results, is a key change that requires people to be focused on outputs and prepared to explore and learn from each situation. This type of approach requires time, commitment, and support.

People: Sir Terry Leahy exemplifies tesco missions in the following statement "Tesco doesn't want one leader; we want thousands of leaders who take initiative to execute the strategy". People grow with us. Many rise from the shop floor to run the shops they work in, or move to other jobs within the business, gaining valuable leadership and professional skills along the way. Access to opportunities keeps people motivated and committed, delivering great service.

Tesco have worked hard to create a culture of trust and respect, where managers help their people to do their jobs. We know people work better when they are given the power to make decisions and take responsibility, and tesco recognise the work they do and say thank you. Tesco encourage people to learn from their mistakes, and improve their performance.

Source: tesco plc 2008

Operation: Tesco slogan "Every Little Help"can be translated to constant incremental improvements of the Steering wheels` five arch. Figure about shows a template of the "Steering wheel Update", a monthly report tailored to each store with individual feedbacks on its performance in key areas. In addition to this report tesco attached "Shopping lists". To describe in simple term key elements of the wheel so employees can incorporate them in their daily activities.

Customers: Tesco has strong commitment of putting customer's interest first. The main focus is therefore on its `Everyday low price strategy in combination with other promotions. The goals are to regularize low prices for Tesco customers and offer low prices not as a strategic option, but on a daily basis.

On the principle that what gets measured gets done, you can see that using processes like the balanced scorecard helps organizations to focus their energy and attention on business priorities. This does not have to be designed or implemented by consultancies…it is an approach, rather than a strict methodology.

Community: The addition of this fifth arch to Steering wheel shows that tesco recognizes its corporate responsibility of the community. Therefore it initiates numerous activities including for tesco summer soccer camps, which were held during aug 2008 for employees, children and kids from schools around uk.

Tesco play a positive role in our local communities and work hard to be good neighbour. Tesco aims to give atleast 1% of pre-tax profits to charity and in June 2008 tesco contribution was £57 million.

Tesco are on track to hit our target of raising £2.5m for our Charity of the Year, Marie Curie. We raised over £500,000 in a single weekend this spring through a Great Daffodil Appeal, our most successful national collection to date. Tesco announced in June that Sports for Schools & Clubs and Computers for Schools will be combined to create a massive new voucher collection scheme. It will be launched at the beginning of next year and will run for an extended period. In response to feedback from schools, tesco will be extending the products tesco offer into other areas of the curriculum such as health and art. This community works bring more closer to the local community which is beneficial to the tesco managing operations technique.


III) Promote the importance and benefits of quality as a contribution to the

Organisation's strategic objectives .

Quality is important because it has the certain benefits. The benefits can be external and the internal benefits.

Internal benefits

Improved cost effectiveness.

Better control in the process.

Reduction of wastages.

Improved productivity.

Better relation with employees, job satisfaction and employees participation.

Increased customer retention.

Standardization of work routine.

Increase sales and market shares.

High quality gives a competitive advantage.

Lower costs and improved profitability.

External benefits:

Customers get the right products and service.

Correct specifications.

Appropriate intangibles.

Higher customer satisfaction.

Customer retention.

IV) Describe the range of legislation that impacts upon both your area of responsibility and that of your organization, and how to use help and support to rectify non-compliance or deviations from such legislation.

Impact of legislation on business in general

Legislation affects business in a great deal, in fact legislation define the boundaries and regulation of doing business. There are many specific legislation applicable to specific business like the road tolls act, carbon emission act, money laundering, regulation by Food Standards Agency and general legislation affecting all the business in general like National Minimum Wages, Health and Safety Act.

Legislation defines the business modus operandi and the business are modified and constantly changed to follow such legislation and benefit maximum from such legislation. Legislations are extra financial cost on the top of the regular cost of doing business and business should plan in such a way that cost will bring future economic benefit.

Industry Regulation and Industry Guidelines Affecting Tesco

Following are the range of legislations affecting the various part of operation of Tesco

Trading Standards Legislation -- Pricing

Prices Act 1974

Price Marking Order 1999

Consumer Protection Act 1987

Trading Standards Legislation - Age Restrictions

Children and Young Person (Protection From Tobacco Act 1991)

Cigarette Lighter Refill Regulations 1999

Intoxicating Substances Act 1985

Licensing Act 1965

Video Recording Act 1984

Knives - Criminal Justice Act 1988

Fireworks (Safety) Regulations 1997

Fireworks - Explosives Act 1873

National Lotteries Act 1993

Trading Standards Legislation - Quantity, Descriptions & Licensing

Weights and Measures Act 1985

Licensing Act 1964

Trade Descriptions Act 1968

Trade Marks Act 1938

Advertising Standards Authority

Voluntary Codes of Practice

Independent Television Commission and Radio Authority

Control of Misleading Advertisements Regulations 1988

Trading Standards Legislation - Food Labeling

Food Safety Act 1990

Food Labelling Regulations 1996

Food and Environment Protection Act 1985

Freedom of Information Act 2000

Various other Civil and Criminal Laws.

Range of Legislation Affecting a Tesco Store

All Trading Legislations Standards as mentioned above are completely applicable to tesco store operation. Much of trading standard legislations described above are in the blueprint of operation. They are already put automatically in the operation e.g. food packaging, labelling, pricing policy, food safety, weight and measures, price marking order etc.

Health and Safety Act - This legislation requires adequate provision of safety protocols in case of event of fire. Thus, Fire alarms and sprinkling system, provision of first aid are already built in the building design. All the new staff and all staff are trained on fire and safety event and the procedure to be followed thereafter.

Returns Policy - If customer changes their mind about their purchase then they can retain the product with the receipt and return it to the store with the product as sold within 28 days.

Data Protection Act - During the business there are many personal information obtained from customers regarding their financial information and data from the shopping habits. There are adequate controls in the system such that no information is ever leaked or used inappropriately.